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IP Specialized Courts have jurisdiction to award damages in invalidity lawsuits

July 23, 2015

On June 23, the Second Specialized Panel of the Federal Court of Appeals for the Second Circuit issued an important decision affirming that the Federal Courts’ have jurisdiction to award damages in lawsuits seeking the invalidity of trademarks.

Contrary to the position taken by the Federal District Court, the appellate judges found that the Federal Court has jurisdiction to adjudicate a request for damages in cases in which the plaintiff seeks both the invalidity of a trademark and compensation for damages.

The appeal in question, that concerned a lawsuit seeking the invalidation of a trademark and the prevention of the defendant from using same, had been filed against the decision of the 25th Federal District Court of Rio de Janeiro. The lawsuit had also sought compensation for damages. The District Judge dismissed the lawsuit without an examination of the merits of the request for damages, due to his perception that the Federal Courts lack jurisdiction to decide such requests.

Article 109 (I), of the Brazilian Federal Constitution provides that the Federal Courts have jurisdiction to decide “cases in which the Union, an autonomous government agency, or a federal public company have an interest as plaintiffs, defendants, privies or interveners”. Thus, cases in which the BRPTO is a party must be decided by the Federal Courts. On the other hand, the Federal Courts have previously found that they have no jurisdiction to rule on damages. This is because such requests for damages are the result of conflicts between private individuals that should be decided by the State Courts. In addition, article 292, II, of the Brazilian Civil Procedure Code (“CPC”) prevents Judge from ruling on multiple requests in a lawsuit whenever the court has no jurisdiction to rule on all of them. Thus, if the plaintiff submits two requests to the Federal Court and one of them is under the Jurisdiction of the State Court, the Federal Judge would not be allowed to rule on such request.

Furthermore, the Brazilian Superior Court of Justice previously found that while the Federal Courts have jurisdiction to decide cases seeking to invalidate the BRPTO’s administrative acts, the State Courts have the jurisdiction to decide on requests for damages, as this is of no concern to the BRPTO. (see REsp 1.188.105).

However, a plaintiff will often file a lawsuit seeking not only the invalidity of an administrative act from the BRPTO, but also compensation for damages derived from such act. In these cases, the Federal District Court will usually dismiss the part of the lawsuit dealing with the request for damages, and declare itself incompetent to decide in this respect.

During the session of the Specialized Panel, the appellate judges found that authorizing the Federal Courts to determine both the invalidity of a trademark and compensation for damages (in cases with cumulative requests) would improve the resolution of conflicts. In the opinion of the appellate judges, the plaintiffs would no longer need to file separate lawsuits before the State and Federal Courts, saving it time and resources.

Although the Second Panel did not have a uniform opinion on the matter, it is important to highlight that this reasoning is not new. Appellate Judges, such as Liliane Roriz, had already expressed the same opinion in the past. According to Judge Roriz, the principle of the reasonable length of proceedings should prevail over the procedural rule on article 292, II, of the CPC. This is because the request for damages itself could become impracticable in case the owner of the violated right had to wait for the decision on the invalidity of the trademark or patent to be unappeallable to, only after this event, claims the due damages to the State Court. Until it would have happened, the right for damages would be barred by the statute of limitations.

This recent decision of the Second Specialized Panel establishes a standard for the court and provides IP litigants with significant guidance.

 

If you have any questions or need additional information, please contact us at prevail@lickslegal.com.